Hendrickson - Tax Court Sustains Civil Tax Liabilities

[Gregg]

double post

[Gregg]

Pete says "nada, cause I don't wanna".

Is that his proposed calculation or number of cases he won?

Yes.

[KickahaOta]

Oops. Rule 155. I hadn't noticed.

Neither did the Tax Court, at first. The original decision entered on 2/11 said "Decision will be entered for respondent" -- an outright IRS win. Then the next day someone noticed that this wasn't quite the case:

We issued a memorandum opinion in this case (T.C. Memo 2019-10), concluding that decision would be entered for respondent. However, that same opinion redetermined adjustments made in the notice of deficiency, including filing status and the applicable penalties. Accordingly, it is ORDERED that the Court's memorandum opinion (T.C. Memo 2019-10) filed February 11, 2019, is amended as follows:
On page 29, the decision line is deleted and replaced with "Decision will be entered under Rule 155."
It is further ORDERED that on or before May 13, 2019, the parties shall submit computations under Rule 155.

EDIT: For the curious, the differences to be ironed out were:

• Since Pete filed "zero returns", the IRS prepared substitute returns for each year; and the filing status they selected for each year seemed to be drawn out of a hat. They considered him "single" for a couple of years, which can't be right because married people can't file as single. The Tax Court said that these years needed to be recomputed, either as "married filing separately" or "married filing jointly".
• The IRS imposed 75% fraud penalties under 6663(a); and in the alternative, since it wasn't clear whether the filings would even be considered valid returns, they also listed 6651(f) penalties for fraudulent failure to file. The Tax Court decided that no, the returns weren't valid, so the 6651(f) penalties would need to be used in place of the 6663(a) penalties. The difference shouldn't matter much if at all in this case.

If Pete engages in his usual... well, usualness in his Rule 155 calculations, I would expect the Tax Court's ruling to be extremely abrupt; the judges typically have very little patience for those who try to use Rule 155 to rehash lost arguments or raise new ones that should have been raised earlier.

[jcolvin2]

The almost final chapter - June 3, 2019 Order on Rule 155 Computations:
https://www.ustaxcourt.gov/InternetOrde ... sID=291874

UNITED STATES TAX COURT
WASHINGTON, DC 20217
PETER E. HENDRICKSON & DOREEN M. ) SR
HENDRICKSON, )
)
Petitioners, )
v. ) Docket No. 6863-14.
COMMISSIONER OF INTERNAL REVENUE, )
)
Respondent )

ORDER
This case was tried on March 29, 2017, in Detroit Michigan, and briefing
was ordered. Further trial was held on August 13, 2018, solely on the issue of the
Commissioner's compliance with section 6751(b), and further briefing was ordered
on section 6751(b) approval. On February 11, 2019, the Court issued a
memorandum opinion in this case (T.C. Memo. 2019-10). Because the Court's
determinations as to filing status and the applicable penalties differed from the
Commissioner's notices of deficiency, Rule 155 computations were required.
Rule 155(a) provides that when the Court issues an opinion, it may withhold
entering its decision while the parties submit computations. Rule 155
computations are solely for the purpose of considering the "correction computation ofthe amount to be included in the decision" and are generally mathematical adjustments. Vento v. Commissioner, 152 T.C. __, __ (slip. Op. at 12) (Feb. 4,
2019).

On February 12, 2019 we ordered the parties to submit computations taking
into account our holdings in Hendrickson v. Commissioner, T.C. Memo 2019-10.
The parties each timely submitted computations presenting different calculations.

The Rule 155 computations were to take into account our determinations
regarding Mr. Hendrickson's filing status and the additions to tax applicable to
each year at issue. As we stated in our opinion, the parties stipulated that Mr. and
Mrs. Hendrickson were married during all years at issue. But the Commissioner used single filing status for Mr. Hendrickson when preparing substitutes for return
for 2005 and 2006. Correcting that error required computations. We also did not
uphold any section 6663(a) penalties because none of the documents filed by the
Hendricksons represented an honest and reasonable attempt to comply with the
Federal tax laws and thus whose documents were not returns. Instead, we held that the addition to tax under section 6651(a)(1) and (f) for fraudulent failure to file applies to all years at issue, and the section 6651(a)(2) addition to tax for failure to pay applies to years 2005 and 2006.

The Hendricksons argue that the Commissioner's calculations are incorrect
because the Commissioner (1) "appl[ies] incorrect multipliers in calculating
proposed 6651(f) additions"; (2) fails to account for amounts paid in calculating
section 6651(a)(2) additions to tax; (3) fails to properly account for personal
exemptions; (4) omits tax shown and paid for 2003; and (5) fails to appropriately
credit withholding amounts. We will address each of these issues and how they
affect each year before us.

The Hendricksons first argue that the Commissioner "appl[ies] incorrect
multipliers in calculating proposed 6651(f) additions".

Section 6651(a)(1) provides for an addition to tax of 5% per month up to
25%¹ for failing to file a required return. Section 6651(f) provides that if the
failure to file is fraudulent, 5% becomes 15% and 25% becomes 75%. Therefore
when 6651(f) applies, the section 6651(a)(1) addition becomes 15% per month up
to 75%.

Section 6651(a)(2) provides for an additional addition to tax of 0.5% per
month up to 25% for failing to pay an amount shown on a required return.

If both an addition to tax under section 6651(a)(1) and (a)(2) apply, the
amount of the addition under paragraph (1) is reduced by the amount of the
addition under paragraph (2). Sec. 6651(c)(1). Specifically, section 6651(c)(1)
requires a monthly reduction of the 15% section 6651(a)(1) and (f) addition to tax
by the 0.5% section 6651(a)(2) addition to tax. Thus the maximum addition under
section 6651(a)(1) and (f) would be reached in five months at 72.5% (5 x 14.5% = 72.5%) if the additions for fraudulent failure to file and failure to pay apply. Then,
on top of that, the section 6651(a)(2) addition for failure to pay is applied.

The Hendricksons next argue that the Commissioner fails to account for
amounts paid in calculating section 6651(a)(2) additions to tax in 2005 and 2006.
Under section 6651(b), the additions under section 6651(a) apply only to the net
amount due; payments, such as withholding, must be taken into account.

The Hendricksons next argue that the Commissioner's computations fail to
properly account for all of their exemptions, which (implicitly) include children
who were not previously claimed and who were not proved at trial. But we do not
address new issues under Rule 155. Vento, 152 T.C. at __ (slip. Op. at 12). This is
a new issue, it is not purely computational, and we will not consider it.

Finally, the Hendricksons contend that the Commissioner fails to appropriately
credit withholding amounts. As previously noted, the additions under section
6651(a) apply only to the net amount due; payments, such as withholding, must be
taken into account. Sec. 6651(b).

2002

The Commissioner used the correct multiplier in calculating the section 651(a)(1) and (f) addition to tax for 2002. The only addition to tax for this year is undersection 6651(a)(1) and (f). Therefore, the correct multiplier is 0.75 (i.e.,
75%). Although the Commissioner's explanation states only that the addition to
tax is a "manually computed penalty" and does not explain how he arrived at it, he
correctly calculated the addition to tax at 75%.

Although the Commissioner used the correct multiplier, it is unclear whether heapplied that multiplier to the correct amount. The Commissioner's calculation
as to the amount of the section 6651(a)(1) and (f) addition to tax matches the
amount of the penalty shown on the notice of deficiency. But the fraud penalty is
applied to the amount of an underpayment (sec. 6663) whereas an addition to tax
for a fraudulent failure to file is applied to the tax required to be shown on the
return (sec. 6651(a)(1)). The Commissioner's computation of the addition to tax
for fraudulent failure to file contains the conclusory statement "Manually
Computed Penalty" with no computations shown. And from the amount of the
addition to tax, it is not readily apparent that the Commissioner applied the
multiplier to the tax required to be shown on the return. It is also unclear whether
the Commissioner took into account payments or withholding as required by section 6651(b)(1). Accordingly, the Commissioner will need to resubmit
computations of the section 6651(a)(1) and (f) addition to tax for 2002.

2003

The Commissioner used the correct multiplier in calculating the section 6651(a)(1) and (f) addition to tax for 2003. The only addition to tax for this year is under section 6651(a)(1) and (f). Therefore, the correct multiplier is 0.75 (i.e., 75%). Although the Commissioner's explanation states only that the addition to tax is "manually computed penalty" and does not explain how he arrived at it, he
correctly calculated the addition to tax at 75%.

Although the Commissioner used the correct multiplier, it is unclear whether he applied that multiplier to the correct amount. As with 2002, the Commissioner's calculation as to the amount of the section 6651(a)(1) and (f) addition to tax matches the amount of the penalty shown on the notice of deficiency. And like 2002, the Commissioner's computation of the addition to tax for fraudulent failure to file contains the conclusory statement "Manually Computed Penalty" with no computations shown. And from the amount of the addition to tax, it is not readily apparent that the Commissioner applied the multiplier to the tax required to be shown on the return or that he took into account payments or withholding as required by section 6651(b)(1). Accordingly, the Commissioner will need to resubmit computations of the section 6651(a)(1) and (f) addition to tax for 2003.

The Hendricksons argue that the Commissioner omits tax shown and paid for 2003. If this were an error, it would be harmless because any such omission would not affect the results of the calculations. The Hendricksons reported $28 of tax on qualified plans and paid that tax. There was no adjustment to that tax. One option for the Commissioner's computation would have been to include the $28 as "Other Taxes" on line 10 of the Form 4549-A showing his computations. This would have increased the Hendrickson's tax liability as shown on the Form 4549 by $28. Then, the Commissioner would have properly included the $28 on line 12 of that form as a tax shown or previously adjusted. The net effect of those two adjustments on the computation would have been zero. Instead, the Commissioner
omitted the number from both lines. To the extent there was an error, the error
didn't affect the resulting computations.

2004

The Commissioner used the correct multiplier in calculating the section 6651(a)(1) and (f) addition to tax for 2004. The only addition to tax applicable to this year is under section 6651(a)(1) and (f). Therefore, the correct multiplier is 0.75 (i.e., 75%). Although the Commissioner's explanation states only that the addition to tax is a "manually computed penalty" and does not explain how he arrived at it, he correctly calculated the addition to tax at 75%.

Although the Commissioner used the correct multiplier, it is unclear whether he applied that multiplier to the correct amount. As with 2002, the Commissioner's calculation as to the amount of the section 6651(a)(1) and (f) addition to tax matches the amount of the penalty shown on the notice of deficiency (disregarding cents). And like 2002 and 2003, the Commissioner's computation of the addition to tax for fraudulent failure to file contains the conclusory statement "Manually Computed Penalty" with no computations shown. It appears that the Commissioner applied the multiplier to the tax required to be shown on the return, but it is not clear whether he took into account payments or withholding as required by section 6651(b)(1). Accordingly, the Commissioner will need to resubmit computations of the section 6651(a)(1) and (f) addition to tax for 2004.

2005

The Commissioner used the correct multiplier in calculating the section 6651(a)(1) and (f) addition to tax for 2005. The Commissioner's computations show his calculation of the 6651(a)(1) and (f) addition for 2005 using the multiplier ".725." For this year, both the section 6651(f) and 6651(a)(2) additions to tax applied, thus 72.5% is the right multiplier for the section 6651(a)(1) and (f) addition to tax.

Although the Commissioner used the correct multipliers, it is unclear whether he applied them to the correct amount. For this year, the Commissioner's computation includes a separate computation of the additions to tax. The Commissioner applied the multiplier to the tax required to be shown on the return, but the computation shows "payments on or prior to due date of return" to be zero. But the record shows withholding. The Commissioner does not account for this withholding or explain why it should be disregarded. Accordingly, the Commissioner will need to resubmit computations of the section 6651(a)(1) and (f) addition to tax for 2005.

2006

The Commissioner used the correct multiplier in calculating the section 6651(a)(1) and (f) addition to tax for 2006. The Commissioner's computations show his calculation of the 6651(a)(1) and (f) addition for 2006 using the multiplier ".725." For this year, both the section 6651(f) and 6651(a)(2) additions to tax applied, thus 72.5% is the right multiplier for the section 6651(a)(1) and (f) addition to tax. The Commissioner also applied the correct multiplier (25%) for
the addition to tax for failure to pay.

Although the Commissioner used the correct multipliers, it is unclear whether he applied them to the correct amount. For this year, the Commissioner's computation includes a separate computation of the additions to tax. The Commissioner applied the multiplier to the tax required to be shown on the return, but the computation shows "payments on or prior to due date of return" to be zero. But like 2005, the record shows withholding and the Commissioner does not account for this withholding or explain why it should be disregarded. Accordingly, the Commissioner will need to resubmit computations of the section 6651(a)(1) and (f) addition to tax for 2005.

Conclusion

The Hendricksons raise a variety of arguments, some of which we do not address because they are frivolous. As to the calculation of the additions to tax, the Commissioner did not adequately support or explain his calculations. To the
extent he considers his computations of the additions to tax to be correct, the
Commissioner can respond to this order with an explanation as to why they are
correct, including computations for the "manually computed penalties" for 2002
through 2004. For any year he revises his computation of the additions to tax, the
Commissioner should include the revised computations and a revised decision.
Accordingly, it is

ORDERED that the Commissioner shall file a response to Petitioners'
Computation for Entry of Decision by June 28, 2019.
(Signed) Ronald L. Buch
Judge
Dated: Washington, D.C.
June 3, 2019



¹ The maximum additions to tax under sections 6651(a)(1) and (2) apply
here. The maximum additions to tax will apply after 5 months under (a)(1) and 50
months under (a)(2). Mr. Hendrickson did not remedy the failures to file and pay
within 50 months.

[Famspear]

[ . . . ] The Commissioner's computation of the addition to tax for fraudulent failure to file contains the conclusory statement "Manually Computed Penalty" with no computations shown. And from the amount of the addition to tax, it is not readily apparent that the Commissioner applied the multiplier to the tax required to be shown on the return. It is also unclear whether the Commissioner took into account payments or withholding as required by section 6651(b)(1). Accordingly, the Commissioner will need to resubmit computations of the section 6651(a)(1) and (f) addition to tax for 2002.

[ . . . ]

Although the Commissioner's explanation states only that the addition to tax is "manually computed penalty" and does not explain how he arrived at it, he correctly calculated the addition to tax at 75%.

[ . . .]

And like 2002, the Commissioner's computation of the addition to tax for fraudulent failure to file contains the conclusory statement "Manually Computed Penalty" with no computations shown. And from the amount of the addition to tax, it is not readily apparent that the Commissioner applied the multiplier to the tax required to be shown on the return or that he took into account payments or withholding as required by section 6651(b)(1). Accordingly, the Commissioner will need to resubmit computations of the section 6651(a)(1) and (f) addition to tax for 2003. [ . . .]

And so on . . . . . .

If there is anything that I remember from my teachers in math class in elementary school, it is the refrain:

Show your work. Show your work. Show your work.

Being right is not enough.

Show your work.

[Cpt Banjo]

If there is anything that I remember from my teachers in math class in elementary school, it is the refrain:

Show your work. Show your work. Show your work.

Being right is not enough.

Show your work.

To be contrasted with the irritating phrase found in college math textbooks: "The proof is left as an exercise for the reader."

[AndyK]

If there is anything that I remember from my teachers in math class in elementary school, it is the refrain:

Show your work. Show your work. Show your work.

Being right is not enough.

Show your work.

To be contrasted with the irritating phrase found in college math textbooks: "The proof, being obvious, is left as an exercise for the reader."

FIFY

[Cpt Banjo]

To be contrasted with the irritating phrase found in college math textbooks: "The proof, being obvious, is left as an exercise for the reader."

FIFY

From What Is the Name of This Book? by logician Raymond Smullyan:

When Professor A. says something is obvious, it means that if you go home and think about it for a couple of weeks, you will realize it is true.

When Professor L. says something is obvious, it means that if you go home and think about it for the rest of your life, the day might come when you will see it.

When Professor C. says something is obvious, it means that the class has already known it for the last two weeks.

When Professor F. says something is obvious, it means that it is probably false.

[Famspear]

On July 2, 2019, the U.S. Tax Court entered its decision in the Hendrickson case, no. 006863-14.

Total tax deficiencies, 2002 through 2006: $39,805.00

Total section 6651(f) additions to tax: $11,519.55

Total section 6651(a)(2) penalties: $1,194.50

Grand total: $52,519.05, plus interest.

[notorial dissent]

That it is really sad, not to mention pathetic, that Pratlin' Pete went to jail and has made all this drama over what amounts to about $7,961‬ a year in tax owed. When they figured that, I will assume it was from what they could determine Pete(and Doreen) earned for a given year. Now would they have applied the standard deductions and what not in figuring it, or just gone for tax on amount received? It would seem to me that Pratlin' Pete would most likely have owed a whole lot less if he'd just properly filed and been done with it.

[The Observer]

What is even more sad is what does Peter and Doreen to show for that approximate $8k per year that they failed to pay over? I can surmise that most of that money ended up being wasted on supporting CtC, or spent on temporary luxuries that most people in the Hendrickson's income level would not consider buying in the first place.

Of course, this means Pete will now have to come up with another tax denier strategy of why he doesn't have to pay the taxes that the courts have ruled he legally owes. So prepare yourself for another ten years or so of CtC madness as Pete attempts to beat the revenue officer(s) assigned to collect his delinquent taxes.

[notorial dissent]

Let's just say that I am shall we say skeptical that the/any "revenue officer(s)" who get stuck with this will ever see more than pennies on the dollar, if that. Pete is a deadbeat, marginally employable(maybe in a desperate universe) former?? felon. He's unemployed, and probably unemployable, and as far as I can tell he deals almost entirely in either barter or cash, and I don't think/can't believe he's getting rich selling CTC.

[AndyK]

Next step: Pete applies for the IRS' Fresh Start Initiative.

I crack myself up.

[Famspear]

Let's just say that I am shall we say skeptical that the/any "revenue officer(s)" who get stuck with this will ever see more than pennies on the dollar, if that. [ . . . ]

Preposterous Peter should, however, worry about a possible administrative levy under Internal Revenue Code sections 6334(a)(13) and 6334(e)(1) with respect to his principal residence in Michigan. Eventually, the Federal tax lien on all his property (real estate and otherwise) will probably come into existence. His residence might be seized by the IRS (if the seizure were to be approved by the U.S. District Court).

[The Observer]

Eventually, the Federal tax lien on all his property (real estate and otherwise) will probably come into existence. His residence might be seized by the IRS (if the seizure were to be approved by the U.S. District Court).

Well, the federal tax lien will come into existence very quickly, once the tax has been assessed, the Hendricksons noticed of the tax (and penalty/interest) due, and they fail to pay the tax within ten days after the notice is issued. That will attach to any asset that Pete and/or Doreen owe and does not require that a notice of lien be recorded at the time the lien arises. Of course, there are methods and steps to delay that recordation that the Hendricksons could pursue which would be in their interest to do so. A notice of lien will affect their credit rating, ability to borrow, and put all other creditors on notice that the federal government has a secured interest in their assets.

In most cases, a notice of lien is not required to issue administrative levies against wages, income, bank accounts - but the lien itself must have arisen before the IRS can issue such levies. In the case of administrative seizures the IRS will typically record the notice per state law prior to seizure. And the notice of lien must be recorded prior to requesting district court to grant permission for the seizure.

[Famspear]

Well, the federal tax lien will come into existence very quickly, once the tax has been assessed, the Hendricksons noticed of the tax (and penalty/interest) due, and they fail to pay the tax within ten days after the notice is issued. [ . . . ]

Yes, and if I recall correctly, the assessment generally can be made after the expiration of 90 days from the date of the Tax Court's decision. The 90 day period from July 2, 2019 would end at the close of the day on September 30, 2019. If Hendrickson wants to appeal the Tax Court decision, he would need to file a notice of appeal with the clerk of the Tax Court by September 30.

And, even if he does file a timely appeal, the IRS generally could go ahead and assess the deficiency (and issue the section 6303 "notice and demand") -- unless Hendrickson were to file a bond with the Tax Court on or before the time he files the timely appeal. To obtain the bond, he would have to find a surety approved by the Tax Court. The bond could be as much as double the amount of the deficiency he would be appealing. See generally Internal Revenue Code section 7485(a).

[notorial dissent]

Eventually, the Federal tax lien on all his property (real estate and otherwise) will probably come into existence. His residence might be seized by the IRS (if the seizure were to be approved by the U.S. District Court).

Well, the federal tax lien will come into existence very quickly, once the tax has been assessed, the Hendricksons noticed of the tax (and penalty/interest) due, and they fail to pay the tax within ten days after the notice is issued. That will attach to any asset that Pete and/or Doreen owe and does not require that a notice of lien be recorded at the time the lien arises. Of course, there are methods and steps to delay that recordation that the Hendricksons could pursue which would be in their interest to do so. A notice of lien will affect their credit rating, ability to borrow, and put all other creditors on notice that the federal government has a secured interest in their assets.

In most cases, a notice of lien is not required to issue administrative levies against wages, income, bank accounts - but the lien itself must have arisen before the IRS can issue such levies. In the case of administrative seizures the IRS will typically record the notice per state law prior to seizure. And the notice of lien must be recorded prior to requesting district court to grant permission for the seizure.

Presupposes that Preposterous Pete has anything that a lien can be placed against.

[KickahaOta]

A comparison of the original notice of deficiency with the final ruling of the Tax Court (including the Rule 155 calculations):

• 2002: The IRS assessed a $9348 deficiency plus $10394 in penalties under 6663(a). The Tax Court upheld the entire $9348 deficiency but reduced the penalties to $2779.50 under 6651(f).
• 2003: The IRS assessed a $7997 deficiency plus $9452 in 6663(a) penalties. The Tax Court reduced the deficiency to $7996 (presumably rounding somewhere) and reduced the penalties to $1781 under 6651(f).
• 2004: The IRS imposed a $10369 deficiency plus $7777 in 6663(a) penalties. The Tax Court upheld the entire $10369 deficiency but reduced the penalties to $3495 under 6651(f).
• 2005: The IRS imposed a $10696 deficiency plus $2675 of 6651(a)(2) penalties and $7755 of 6651(f) penalties. The Tax Court upheld the entire $10696 deficiency but reduced the 6651(a)(2) penalties to $1194.50 and the 6651(f) penalties to $3464.05.
• 2006: The IRS assessed a $1426 deficiency plus $357 in 6651(a)(2) penalties and $1034 in 6651(f) penalties. The Tax Court upheld the entire $1426 deficiency but eliminated the penalties.

So you can look at the outcome in two ways.

If you believe in the righteousness of Pete's cause, you can crow that he reduced the penalties by roughly two-thirds -- from $39443 to $12714.05, by my back-of-the-envelope math -- as well as taking a breathtaking $1 off the $39836 total deficiency.

If you don't, you presumably observe that the Tax Court ultimately upheld 99.9975% of the original deficiency, and that Pete could have reduced the penalties to zero by not being such a stubborn-minded REDACTED in the first place.

[The Observer]

Presupposes that Preposterous Pete has anything that a lien can be placed against.

A lien is not "placed" against anything specifically. A lien arises as an operation of law and attaches immediately to everything that the delinquent taxpayer owns, regardless of whether there is any equity in the asset or not. If you want to say that the liens are going to attach to nothing of value, that would be a more accurate statement. Famspear has already mentioned that the Hendricksons have a personal residence, which I presume he means that it is owned by the Hendricksons. If that is the case, the statutory lien will attach to it. If the IRS determines that Pete and Doreen have little to no equity in the property, that will mean that a seizure and sale of the property will not occur. But the lien will still attach to the property for the life of the assessment (ten years from the date it was assessed unless extended as dictated by law). That will be a pretty problem for the Hendricksons since it will tie up any attempt to borrow from whatever equity that may develop in the property and delay the sale of the residence. There are avenues under IRC 6325 that would allow the lien to be discharged or subordinated as appropriate.

But for argument's sake, let us suppose that the Hendricksons have nothing at all in terms of assets/income. The IRS could opt to not record a notice of lien if the employee(s) determine that doing so would be pointless. I don't think that will happen simply because of the Hendricksons' history; far safer to record the notice just in case something turns up down the road.

[jcolvin2]

A comparison of the original notice of deficiency with the final ruling of the Tax Court (including the Rule 155 calculations):

• 2002: The IRS assessed a $9348 deficiency plus $10394 in penalties under 6663(a). The Tax Court upheld the entire $9348 deficiency but reduced the penalties to $2779.50 under 6651(f).
• 2003: The IRS assessed a $7997 deficiency plus $9452 in 6663(a) penalties. The Tax Court reduced the deficiency to $7996 (presumably rounding somewhere) and reduced the penalties to $1781 under 6651(f).
• 2004: The IRS imposed a $10369 deficiency plus $7777 in 6663(a) penalties. The Tax Court upheld the entire $10369 deficiency but reduced the penalties to $3495 under 6651(f).
• 2005: The IRS imposed a $10696 deficiency plus $2675 of 6651(a)(2) penalties and $7755 of 6651(f) penalties. The Tax Court upheld the entire $10696 deficiency but reduced the 6651(a)(2) penalties to $1194.50 and the 6651(f) penalties to $3464.05.
• 2006: The IRS assessed a $1426 deficiency plus $357 in 6651(a)(2) penalties and $1034 in 6651(f) penalties. The Tax Court upheld the entire $1426 deficiency but eliminated the penalties.

So you can look at the outcome in two ways.

If you believe in the righteousness of Pete's cause, you can crow that he reduced the penalties by roughly two-thirds -- from $39443 to $12714.05, by my back-of-the-envelope math -- as well as taking a breathtaking $1 off the $39836 total deficiency.

If you don't, you presumably observe that the Tax Court ultimately upheld 99.9975% of the original deficiency, and that Pete could have reduced the penalties to zero by not being such a stubborn-minded REDACTED in the first place.

When the 90 days passes from the entry of the decision, and the assessment is made, the collection function of the IRS will be looking for payment of approximately $103,000. (Interest is a bear.)